Bonanza on buses gives Stagecoach lift to £84m

Mind the gap: Souter is hoping the group's St Pancras win will make up rail earnings

Soaring numbers of people getting on trains and buses despite rising fares has more than offset a Government clampdown on profiteering on the railways, latest figures from passenger transport group Stagecoach indicate.

On the back of marketing campaigns to get people out of their cars and onto public transport, Stagecoach today reported a 7.8% like-for-like increase in revenues fromits bus services around the country, a 9.5% increase fromits Virgin Rail joint venture running trains out of Euston to the Midlands and north west, and a stonking 15% at its South West Trains operations.

The Waterloo-based commuter rail network, Britain's busiest train company, has been the mainstay of Stagecoach profits for much of the decade since privatisation.

Passenger numbers on SWT are up 7% but revenues at £322 million in the halfyear to the end of October have grown at more than twice that rate on the back of rising fares - the latest 4.8% increase will take a monthly ticket from Southampton up to £400 - and a multimillion pound crackdown on faredodgers.

However, the profits from South West Trains will not be so rich in future after a clampdown by the Department for Transport in its re-licensing of the franchise. Stagecoach has agreed to pay back nearly £1.2 billion in excess profits to the Treasury over the next 10 years and that has taken its toll on SWT profits in the last six months. They fell 20% to £25 million.

However, Stagecoach chief executive Brian Souter is not unhappy as some analysts had forecast a 50% fall in rail earnings.

"We had anticipated that the [profit] margin would decrease following the commencement of the new franchise reflecting the competitive bidding environment for rail franchises," he said. "While the reported margin has fallen [from 11.3% to 7.8%], it is better than our original expectation for this point in the franchise."

In any case, Souter is hoping Stagecoach's new franchise win, running the rebadged East Midland Trains out of St Pancras, replacing National Express's Midland Mainline, will make up the shortfall and analysts are already pencilling in £10 million of profits in its first six months of operations.

Stagecoach today reported a 9.3% increase in group half-year profits to £84 million. Those gains came as strong marketing campaigns, investment in new fleets and concessionary fare deals with local authorities produced a 54% leap in bus profits to £52 million.

Though it has pulled out of London, Stagecoach still runs services in the south in Kent, Hampshire and Cambridge. Stagecoach's 49% stake in Virgin Rail - which is reeling from the loss of its CrossCountry franchise to Arriva - brought in £13 million of profits, 250% better than a year earlier.

The interim dividend, more than a quarter of which goes to Souter and his sister Ann Gloag, is up 12.5% to 1.35p.